3 Easy Steps to Take for a Better 401k
I was recently invited to a small business 401k checkup meeting, where we talked about how the company's employees were participating in its plan, the overall performance, and fund allocations.
When the representative suggested to hold a seminar on asset allocation, I asked whether she could separate the sessions into different age groups. She said "Oh, that's not a problem. I think that's a very clever idea, but no one has ever asked me to do it this way." The right mix of stocks and bonds is different for someone early in their career versus someone who's about to retire. I'm sure you know this, but it seems like no one else in your company does.
Not the person sitting beside you, not your boss, and not HR. No one knows much about asset allocation other than you. Yikes...
The response was rather surprising. You'd think that everyone would know about asset allocation by now, but that's simply a false assumption. Being immense in personal finance literature has its disadvantages, as we often overlook the fact that most of the general public knows very little about basic personal finance and investing principles.
As a savvy investor who has a much better chance of achieving financial freedom, here's how you can help everyone around you.
All 401k plans are required to be looked at and discussed on a regular basis. Chances are good that representatives from the company managing your plan comes regularly too. Ask your plan administrators to have the representatives (or bring in experts) give seminars about your plan, the benefits of saving and investing for the long term.
Most of the information they give may be familiar to you, but a refresher is always good even if you already know every tip there is to know. If anything, reminders will make you think about your retirement plan more, which can only help.
Offer suggestions to others on how they can contribute to their plan, and perhaps even come up with a step by step plan to navigating the 401k plan web interface. The more comfortable your fellow workers are with the plan, the more likely they will commit more of their salary into it. The benefit to you may not be immediate, but bigger size 401k plans tend to have better expense ratios, which helps everybody in your company.
The reality is that most 401k plan administrators have many other more pressing jobs than thinking about the company's 401k plan. As a result, the 401k plan is usually an afterthought of an afterthought. If you think about how important even a fraction of a percent makes in your plan over the years, the likely neglect of your primary retirement vehicle sounds ludicrous. By having more people talk about the plans at work and showing interest, it's that much more likely that your plan administrators will keep a closer tab of what could be done to improve the overall function and performance.
It's not what you expect, but what you inspect. Help keep the plan in the forefront of your plan administrator's minds, and good things will follow. Having said that, I have got to ask: Have you maxed out your IRA yet?
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